Perturbed by the ongoing political uncertainty, the trade and industry leaders met and expressed concerns that the rising political uncertainty, deteriorating security situation and high cost of doing business are forcing local industrialists to shift their businesses to foreign countries. They urged the government and the political parties to settle their lingering disputes. Otherwise, the flight of capital will cost local jobs and future investment.
The criticism by business leaders is sharp and mirrors their frustration on all matters that have to do with business in the country. Karachi Chamber of Commerce and Industry (KCCI) President Mohammad Jawed Bilwani said the political turmoil has shaken the confidence of local business people and foreign investors alike, who have also lost hope that the political crisis will ever be over.
“After getting fed up with political uncertainty and economic issues, it is alarming that many businesspeople are leaving Pakistan to set up their ventures abroad, thanks to a pleasant working environment with an uninterrupted supply of power, gas, water, etc.,” he said.
The President said the investors have also lost “trust” in the ruling and opposition parties and even the establishment as it couldn’t play a significant role in ensuring political stability and reducing unprecedented power, gas and water tariffs, which have been the highest compared to other countries.
He said the UAE government takes a couple of days to clear investors’ requests to set up any unit; and in a week, the investors start constructing the factory. In contrast, however, local investors in Pakistan run from pillar to post for over a year to get approval for industrial set-up.
Pakistan Business Council (PBC) Chief Executive Ehsan Malik said that for investors anywhere, the most important factors are policy continuity, stable government, and the physical safety of employees, goods, and other assets.
“In Pakistan, the additional factors are the high cost of energy, the disproportionate burden of taxes on the formal sector, an unlevel playing field versus the informal sector, affordability and availability of suitable land and utilities and a bureaucratic red tape,” he said.
“It is important to differentiate between existing and new investors. The former have seen worst times and developed resilience to overcome temporary disruptions. The new investors would be put off by the siege of the capital and large cities in Punjab,” he said. He added that these include MNCs contemplating establishing back offices for their global operations in Pakistan, for which high-speed, reliable internet continuity is vital but absent.
He said that to improve the investment climate, political parties need to develop a consensus on the economy. Perversely, the only consensus they presently have is to make doing business both difficult and costly.
North Karachi Association of Trade and Industry (NKATI) President Faisal Moiz Khan pointed out that political uncertainty hurts trade and the economy. “Despite some positive trends in certain economic indicators, the overall sentiment remains cautious,” he said.
Local and foreign investors are worried about the political crisis, which is affecting their confidence in Pakistan. The current situation is not only deterring foreign investment, but also causing a decline in domestic investment, he said.
Political instability is leading to a decrease in consumer spending, which in turn is affecting businesses, particularly small and medium-sized enterprises. To ensure a stable political environment, he suggested that the government and opposition parties should engage in a meaningful dialogue to resolve their differences and work towards a common goal.
Institutions such as the judiciary, election commission, and accountability bodies should be strengthened to ensure the rule of law and accountability, the President said, urging the government to focus on implementing economic reforms to improve the business environment, increase investment and create jobs.
On ground, the sentiment of business leaders is reflected in the scenario that the FBR (Federal Board of Revenue) may face a massive revenue shortfall in achieving the assigned target, as the total collection so far stands at around Rs700 billion against the set target of Rs1,003 billion for November 2024.
If the FBR would face a shortfall of Rs160 billion, then the overall shortfall for five months would go up to Rs349 billion, keeping in view the shortfall of Rs189 billion occurring in the first four-month (July-Oct) period of the current fiscal year.
FBR has a serious challenge to maximise the revenue amid suspended economic activities and political uncertainty.
A record stock market rally, receding food inflation and low current account deficit are some positive indicators but these too are sustainable on the strength of a positive business sentiment and political stability.
During the recent political crisis the Pakistan Stock Exchange (PSX) experienced its worst-ever single-day drop, plummeting by 3,505.62 points as panicked investors offloaded shares, reflecting their profound apprehensions about the escalating political tensions. To compound problems, the country’s sovereign dollar bonds also saw a sharp decline. All said and done, political stability is key to economic sustainability and the two works together.
Copyright Business Recorder, 2024
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
Comments
Comments are closed.